Rogers Favors Open Canadian Wireless Over ‘Flawed’ Policy

By Hugo Miller -
Aug 22, 2013

Rogers Communications Inc. (RCI/B), Canada’s
largest wireless carrier, said the government should scrap
foreign ownership limits on telecommunications companies rather
than stick with the current “flawed” policy that favors global
competitors such as Verizon Communications Inc.

“If the end objective for government is to say ‘let’s open
up the market,’ then we’d rather have it open, than flawed in
terms of the structure that is currently in place,” Chief
Executive Officer Nadir Mohamed said in an interview today at
Bloomberg’s Toronto office. “It’s not a level playing field.”

Mohamed and his counterparts at BCE Inc. (BCE) and Telus Corp. (T)
have been pressing the Canadian government to change its
national wireless policy which they say is unfair and handicaps
the big three against a potential new entrant like Verizon. The
New York-based company, whose market value of $135 billion is
close to double that of BCE, Telus and Rogers combined, said in
June it’s weighing a bid to buy Wind Mobile, the largest of
three new Ontario-based carriers.

Verizon Chief Financial Officer Fran Shammo described the
possible bid at the time as “just us dipping our toe in the
water,” and the Globe and Mail reported Aug. 14 the company may
be backing away from its bid. Robert Varettoni, a spokeswoman
for Verizon, said Aug. 9 Wind is one of many business
opportunities that the company is looking at. Varettoni declined
to comment on Canadian issues today.

Four Competitors

The government has been trying to boost competition to
lower wireless bills and has pledged to foster four competitors
in each region of the country. In a spectrum auction in January,
incumbents will be limited to bidding on just one of four blocks
of prime 700-megahertz airwaves while new entrants, including
potentially Verizon, could bid for two.

James Moore, who became Industry Minister last month has
said he will not change the timing of the auction or rules on
block allocations.

“For a company to establish itself in the Canadian
marketplace, that’s a scale of spectrum they would require to
compete across the country,” Moore said yesterday in an
interview.

Asked if the government would consider eliminating the
remaining restrictions on foreign ownership of phone companies,
Moore said that “our policy is to encourage more competition,
and our rules in this auction we think will arrive at that.”

Current rules prohibit any foreign company from buying a
carrier with more than 10 percent market share, which includes
BCE, Telus and Rogers.

Transfer Spectrum

While Mohamed said he would prefer scrapping foreign
ownership restrictions over the status quo, his first preference
would be to change the current rules.

Rogers, BCE and Telus are opposed to rules that effectively
stop them from buying smaller rivals with less than 10 percent
market share because it would mean a transfer of spectrum
ownership while there is no clause stopping a major foreign
carrier from doing so.

Shares of BCE, Rogers and Telus tumbled after Verizon
confirmed it was mulling an entry into Canada. The shares have
since recovered some of those losses after the Globe report
Verizon may not bid.

Rogers rose 0.5 percent to $40.79 at the close in Toronto.
The shares have dropped 9.7 percent this year. BCE is little
changed over the same period, while Telus has dropped 2 percent.

The carriers are also arguing for a change to the spectrum
auction rules.

Postpone Auction

“It’s specifically about government artificially creating
rules that subsidize a large foreign incumbent to take advantage
of rules that were set for new players,” said Mohamed. “We’re
open for competition, just on terms that are the same as ours,”
he said.

If the government wants to really open up the country to
foreign ownership, then it should postpone the spectrum auction
and first address that, Mohamed said.

“If the objective is to allow foreign companies to come
in, let’s not do it with what I would describe as a stacked
deck,” he said.

Rogers would survive as a company if that rule were
scrapped by the government, Ken Engelhart, Rogers’s vice
president, regulatory affairs, said in the interview.

“We would,” Engelhart said. “We’re not interested in
selling.”

Deposits by those planning to bid in the Jan. 14 auction
must be made by Sept. 17. Mohamed said there is still time for
the government to come up with an alternative before that
deadline and that rule changes could still be made beyond
September.

Smaller carriers Wind, Public Mobile and Mobilicity have
all struggled to gain market share from their larger rivals,
even after the Canadian government reserved wireless spectrum
for them in 2008. The government in June blocked Telus’s bid to
buy Mobilicity, citing the decision as a precedent for blocking
the transfer of spectrum.